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What’s The Difference Between A Hard And Soft Credit Check?

Kenneth Boyd Updated: December 3, 2023 • 5 min read
woman checking credit score on computer

Key Points:

  • A credit rating is a score that represents how likely the individual is to repay a loan.

  • Credit scores determine the amount of money you can borrow and the interest rate you are charged.

  • For these reasons, it’s important to understand a hard vs. soft credit check and how it impacts your credit score.

Your credit score has a big impact on your personal finances. Lenders use the score to determine how much you can borrow and what interest rates you’ll pay. For these reasons, it’s important to understand a hard vs. soft credit check and how it impacts your credit score. We also delve into strategies to improve your credit score over time.

Your credit score has a big impact on your personal finances.

Why is a Credit Rating Important?

A credit rating is a score representing how likely the individual is to repay a loan. Think of a credit score as a prediction of debt repayment. Credit scores determine the amount of money you can borrow and the interest rate you are charged.

A FICO score is the most frequently used credit scoring system. It’s important to note that simply applying for credit can lower your credit score in the short term, which is why understanding credit checks is important.

What is a Credit Check?

When a lender checks your credit score, the company performs a credit check. The check assesses the risk that the debt will not be repaid. The lender reviews existing and past debts and whether or not the debts were repaid on time. Lenders also consider the types of debts a borrower repays (home mortgage, car loan, credit card debt).

Equifax, Experian, and TransUnion are the three large credit bureaus that track a borrower’s credit history. Lenders send financial details to the credit bureaus when you borrow money, make payments, or miss a payment.

There are two types of credit checks (or credit pulls), and you need to know the difference between hard and soft credit check situations.

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What’s a “Hard Inquiry”?

A hard credit check, or hard inquiry, is a credit check that may cause your credit score to decline. That’s because the number of times you apply for credit is a factor in your credit score. The hard credit check informs potential lenders that you may be taking on more debt.

FICO scores range from 300 to 850, and a hard credit check may affect your credit score by up to 5 points.

An individual frequently applying for credit may be in financial trouble, which makes the individual a higher risk to a lender. On the other hand, a consumer who creates a personal budget pays debts on time and builds an emergency savings account, so they may not need to apply for credit.

A hard pull may stay on your credit report for up to two years. You must give a lender written approval to perform a hard credit check, so think carefully before you take action. 

Several borrowing situations may require a hard credit pull, including credit card applications, auto and mortgage loans, student loans, and applications for a line of credit. A hard credit pull is completed when you apply to rent a home, car, or cell phone contract.

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What is a Soft Credit Check?

What does a soft credit check show? This check does not impact your credit score; you may see this fact promoted by credit card companies and other lenders when they advertise.

When a lender gives a preapproval for credit, the lender performs a soft credit pull. Soft credit pulls are visible on your credit report only to you, so you can see when a creditor checks your credit to make a preapproval offer.

In addition, checking your credit is considered a soft credit check.

Hard Pull vs. Soft Pull

Aspect Hard Pull (Hard Inquiry) Soft Pull (Soft Inquiry)
Initiation When you apply for credit (e.g., credit cards, mortgages, auto loans). Occurs during credit score checks, pre-approval offers, or employment background checks.
Impact on Credit Score Can lower your credit score by a few points temporarily. No impact on your credit score.
Duration on Credit Report Remains on your credit report for up to 2 years. May or may not be recorded, depending on the credit bureau.
Visibility Anyone who pulls your credit report (creditors, lenders). Only visible to you; not shown to creditors or lenders.
Common Examples Applying for a new credit card, mortgage, or car loan. Checking your credit score, credit card pre-approvals, and identity verification by financial institutions.
Purpose Associated with applications for new credit. Often occurs without a direct credit application.
Credit Score Impact Can slightly lower your credit score. No effect on credit score.

Strategies for Managing Credit Check Issues

You can use this discussion to make more informed decisions about your credit score. If your credit score is relatively low and you want to improve the score, don’t approve hard credit pulls for new loans. 

Create a Budget and Build Savings

A better strategy is to improve your credit score by making timely debt payments. If you don’t have a personal monthly budget, create one. Separate your payments into fixed expenses (mortgage, rent, car payments) and variable costs (food, clothing, entertainment). 

Include a budget line item for savings, and build an emergency fund. When you have funds for unexpected costs, you’re less likely to need more credit. Over time, your credit score will improve, and you’ll qualify for loans with lower interest rates.

Understand the Impact of Rate Shopping

If you’re considering a home loan or planning to finance a car, asking several financing companies to perform a hard credit check is not unusual. Multiple credit checks allow each financing company to determine if you qualify for a loan and the interest rate.

As mentioned above, hard credit pulls reduce your credit score, but multiple hard pulls in a short period may be considered a single hard pull for credit scoring purposes. This allows consumers to shop for a competitive loan rate without large damage to their credit score.

Monitor Your Credit Score Activity

Ensure you check your credit report to ensure that the information used to calculate your credit score is accurate. 

Consumers are protected by federal laws that require credit reporting companies (credit bureaus) to provide you with a free copy of your report every 12 months. The reporting companies must make corrections to credit reports and update reports if information is missing.

If, for example, you’ve made all monthly car payments on time for the past year, that positive information should be sent to each credit reporting company. If not, contact your lender and ask them in writing to report the information to the credit bureaus. A history of consistent payments improves your score.

Checking your credit score also helps to prevent identity theft. Someone may have stolen your personal data if a hard credit check was performed without your permission. If you encounter a hard pull that was not approved, contact the credit bureau that posted the information and submit a dispute.

You can also contact the Consumer Financial Protection Bureau (CFPB) if you suspect your personal identity data was stolen.

The Bottom Line

Understanding the difference between soft and hard pull activity will help you make better decisions about applying for credit and whether or not to take on a new loan. You can improve your credit score by creating a budget, building a savings balance, and monitoring your credit score activity. Informed decision-making is the best strategy to improve your finances.



What is the difference between hard and soft credit checks?

It is when someone checks your credit - even you - that a credit pull occurs. When you apply for credit, lenders run hard checks, which can affect your credit score slightly. Soft checks, on the other hand, are for preapprovals or when you check your own credit, and they don't affect your credit score.

What does a hard credit check show?

A hard inquiry or hard pull is also known as a hard inquiry. With a hard credit check, the lender can see how much credit you're juggling and how you've handled credit in the past. This helps them decide if you're financially responsible and how likely you are to pay them back.

Is a hard check bad for credit?

Credit scores can be negatively affected by hard inquiries, at least in the short term. It is true that a hard inquiry stays on your credit report for two years, but it usually affects your credit score for less than five points after a year.

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Written by Kenneth Boyd

Kenneth Boyd is a four-time Dummies book author, including the book Cost Accounting for Dummies. Ken writes, blogs, and provides video content on business topics.